ROTH IRA? Educate me...

[bossass]

So, I'm thinking I need to dump some $ into one of these so called ROTH IRAs so the ol' IRS can't get their greedy hands on it. What do I need to know, what do I need to do? Who do I buy from/through? Assume I know absolutely nothing, because, well, I don't. I hear it's not to late for me to buy in for 08, so I'm thinking I should get on this. I also hear I can do as much as $4k. BTW, I have nothing else going. I make all my $ on 1099s and have no sort of anything beyond my checking and savings account.

Thanks in advance.

[gunniride]

Perfect timing. Buy low, as in now or in the near future.

There are far more educated mags on this, but a simple conservative route would be the Vanguard 500. Check out Vanguard's site and it should be pretty simple. If you are somewhat young, and can afford to fully fund a Roth for the foreseeable future, you will be sitting pretty come 62.

[ohdoctor]

basically the roth IRA is taxed on the way in & grows tax free. a standard IRA is taxed as it is taken out at retirement age. Both grow tax free but the roth is taxed much less because it taxed pre growth. With an IRA, if you take money out early you will be hit with a penalty.

A great book for amateur investing is "Rule #1" by Phil Town. It is an easy read, solid fundamentals, with out gimmicky crap.

You know what they say about free advice...

Good luck.

Is it bad when all your state's passes are closed due to rain/flooding/washouts in mid January?

[butterscotch]

^^^ what he said. Roth IRA contributions are made after taxes. So if you're poor now (or poorer than when you will retire), then your income taxes are low and a Roth is a good idea.

My understanding is that you can make contributions for the past calendar year until April 15 of this year. So you can put this off for a solid 3 months.

[NorthernSpotted...]

I also hear I can do as much as $4k.

I believe it's $5K for '08.

My understanding is that you can make contributions for the past calendar year until April 15 of this year.

True.


Wikipedia. Check it...

http://en.wikipedia.org/wiki/Traditional_IRA

http://en.wikipedia.org/wiki/Roth_IRA

[ski_pdx]

I have been doing this type of work for 10 years. PM me and I will prolly just set you up for nothin. my office is in the Hollywood district.

[Neezer]

You can put in up to $5000 BUT, it depends on your taxable income...if your taxable income is over 105k then you can't put all 5k in. the amount you can add phases out from 105k to 115k.

so if you made under 105, you can put the whole thing in. if you made 107k you can only put in 4000. if you made 110k you can only put in 2500. and if you made 113k you can only put in 1000, and by the time you get to 115k you can't put anything in.

[nsk040]

^^^ what he said. Roth IRA contributions are made after taxes. So if you're poor now (or poorer than when you will retire), then your income taxes are low and a Roth is a good idea.

+1 Regarding structuring. Assuming your tax rate is lower now than when your retire, go for the ROTH and pay the taxes at your current rate (otherwise you go for the traditional).

Regarding what you do with your IRA... Be very weary of anyone who advocates a specific investment strategy or a 'sure thing.' Also, avoid someone who wants to actively manage your portfolio (i.e. a brokerage account) because this will seriously eat away at your portfolio over time and reducing the effects of compound interest. As someone earlier said, buying an index fund is probably the wisest thing to do because you will benefit from diversification (most of the these funds hold 50 or more stocks). If you're younger, perhaps pick one which is more aggressively managed, if you're older, maybe just grab the Vanguard fund which picks all stocks in the S&P as this will be safer. Remember, there is always risk, and past performance is no indication of future performance.

[co skier]

Remember, there is always risk, and past performance is no indication of future performance.

Hope that performance in 08 is not repeated in 09.

[El Chupacabra]

You can put in up to $5000 BUT, it depends on your taxable income...if your taxable income is over 105k then you can't put all 5k in. the amount you can add phases out from 105k to 115k.

so if you made under 105, you can put the whole thing in. if you made 107k you can only put in 4000. if you made 110k you can only put in 2500. and if you made 113k you can only put in 1000, and by the time you get to 115k you can't put anything in.

Income cutoff levels are different if you're married. Google it; don't know offhand...

[jfost]

+1 Regarding structuring. Assuming your tax rate is lower now than when your retire, go for the ROTH and pay the taxes at your current rate (otherwise you go for the traditional).

x2 - this is the BIGGEST misconception with Roth's - everyone thinks it is agreat deal b/c of the tax free withdrawls after age 67 (or whatever it will be in the future)... BUT, as stated confusingly above, you're funding the Roth with "after-tax" money. This is important since if you're in your working and earning years now, you're likely in the highest tax bracket you'll ever be in (until that foreign-born devout Muslim Obama redistributes eveything

If you're going to retire and make no money in the future, then you'll be in a lower tax bracket and will pay hopefully not much in taxes on your Trad. IRA withdrawals. Plus, you get to deduct the contributions to a Trad. IRA - which gives you a nice credit against your current high income.

I also think that given recent events, it is prob. wise to take advantage of ANY and ALL credits or deductions available to us NOW!!! Wouldn't be surprised to see the rules of Roth "modified" in the future.

[bossass]

You can put in up to $5000 BUT, it depends on your taxable income...if your taxable income is over 105k then you can't put all 5k in. the amount you can add phases out from 105k to 115k.

so if you made under 105, you can put the whole thing in. if you made 107k you can only put in 4000. if you made 110k you can only put in 2500. and if you made 113k you can only put in 1000, and by the time you get to 115k you can't put anything in.

Bwa! Good one. I assure you, I'm nowhere near 105K. If taxes got done every three years...

Well, I'm thoroughly confused, but thanks for all the insight. I'll probably take ski_pdx up on his offer for assistance.

[jfost]

Another option - f the IRA's &

[Garth Alger]

Live in the NOW man...

[\Garth]